My question is, claim the insurance premiums as an exception to the early withdrawal rule, which would wipe out most of that $5000? ======> If the withdrawal was made before age 59 and 1/2 and includes amounts what you contributed (your investment earnings) then you may have to pay tax. There are certain situations where the IRS will allow you to withdraw without penalty. You may not have to pay the 10 % penalty for early withdrawals if you meet one of several criteria, including a first-time home purchase, a qualifying higher-education expense, unreimbursed medical expenses, and disability or health insurance purchases if you do not work.you generally note these expenses as itemized deductions on Form 1040 Sch A.

? What sort of documentation is needed?====>you need to File IRS Form 5329 with your yearly tax return. Enter the total amount of the distribution on line 1 of the form, and on line 2 enter the amount that is exempt from the additional 10-percent tax penalty on the IRA disbursement, and the amount of the health insurance premiums. Use the exemption code 07 on line 2 to specify that you claim the exemption from the penalty because you used the money to pay healthcare plan premiums